"BOJ's Early Rate Hike Signal Behind US-Japan Joint Effort to Curb Yen Weakness"

Kyodo News Cites Japanese Government Officials
U.S. Gives Positive Assessment of BOJ Governor Ueda's Remarks
Focus on Possible BOJ Rate Hike in September

There is speculation that remarks made by Kazuo Ueda, Governor of the Bank of Japan (BOJ), were a key factor behind the recent joint intervention by the United States and Japan, which saw direct purchases of yen for the first time in 28 years. During the BOJ meeting in July, Governor Ueda hinted at the possibility of an early rate hike after September, a move that was reportedly viewed positively by the U.S. side and resulted in both countries engaging in special cooperation to curb the yen's depreciation.

Kazuo Ueda, Governor of the Bank of Japan (BOJ). Photo by Reuters Yonhap News.

On August 10, Kyodo News reported, citing multiple Japanese government officials, that "Governor Ueda's statement was highly appreciated by the U.S.," adding, "At the BOJ’s Monetary Policy Meeting scheduled for September 17–18, it is becoming increasingly difficult for the Bank to consider any option other than a rate hike."

On July 31, following the BOJ’s Monetary Policy Meeting, Governor Ueda stated at a press conference, "There is a risk that the underlying inflation rate may exceed the 2 percent price stability target," and added, "We will continue to consider rate hikes to maintain price stability." He also mentioned that whether to raise rates further would be "fully discussed at the next meeting, which will take place after September."

The United States interpreted these remarks as a signal of an additional early rate hike. The U.S. had expressed concern that if Japan delayed rate hikes further, the yen would weaken even more, pushing up prices and long-term interest rates, effects that could ripple out to the U.S. and global financial markets. Governor Ueda’s stance helped ease these concerns.

Since the U.S. and Japanese finance ministers issued a joint statement on foreign exchange market intervention in September last year, the United States has reportedly been urging the Japanese government behind the scenes to encourage the BOJ to raise rates. U.S. Treasury Secretary Scott Bessent expressed concerns that a rise in Japanese long-term interest rates could translate into higher U.S. rates, potentially weighing on the U.S. economy. The Trump Administration, ahead of the upcoming midterm elections in November, has also been particularly sensitive to interest rate movements.

Secretary Bessent recently made comments to the Nikkei newspaper that appeared to urge Japan to move away from its low-interest-rate policy. While he did not directly call for a rate hike, he noted that he has known Governor Ueda for 15 years, describing him as having an excellent sense of the market and expressing deep trust in him. These remarks were interpreted by the market as expectations for a BOJ rate hike.

While many market analysts had previously expected the BOJ’s next rate hike to come in December, the strengthened U.S.-Japan cooperation could potentially accelerate the timing. Kyodo News reported, "After the U.S. and Japanese authorities intervened to purchase yen, some are now forecasting that the BOJ could hike rates again in September," adding that "at the time of intervention, the yen had fallen to nearly its lowest level against the dollar in 40 years, which underscored both countries’ strong determination to halt the currency’s slide."

This content was produced with the assistance of AI translation services.